Author: Ed Drake

The New York Department of Financial Services (NYDFS) has granted virtual currency approval to commercial banking transactions, authorizing a new system from Signature Bank which will allow corporate customers to make bank payments in a form of virtual currency.

Dubbed ‘Signet,’ the platform will allow the bank’s commercial customers to send transactions in tokens known as ‘Signets,’ allowing for free transactions sent directly at any time via the blockchain.

The approval is part of the department’s approach to fostering ‘regulated innovation,’ in providing greater flexibility for Fintech innovation and research.

DFS Superintendent Maria T. Vullo welcomed Signet, which she said would provide a low cost way for businesses to send payments.

“DFS is pleased to strengthen and foster regulated innovation in New York’s burgeoning financial technology sector, specifically within our state-chartered banking system,” Vullo said in a statement. “New York continues to support and help advance innovation through sound state regulation and with products such as Signet, which provide lower-cost ways for businesses to efficiently make payments.”

Joseph J. DePaolo, president and CEO at Signature Bank, said the support of the Department of Financial Services was crucial in helping them turn their digital vision into reality. He noted, “Through regulated innovation, we were able to turn our vision into a reality. It is clear the Superintendent and Department of Financial Services have thoroughly researched the financial technology arena and understand how it impacts the future of financial services. We look forward to working closely with their team to continue to transform digitally.”

Fintech innovation often runs into challenges with regulation, particularly around transactions that might typically require a degree of regulation and licensing beyond the grasp of most startups.

By giving the go-ahead to the Signet scheme as a virtual currency, the DFS has underlined its commitment to supporting emerging applications for cryptocurrency assets.

The approval comes following an extensive and robust assessment of Signature Bank’s application, and is attached to stringent compliance requirements.

Nevertheless, it demonstrates a proactive response from a regulator, at a time of increasing focus on blockchain developments of this kind.

Vertcoin (VTC) has fallen prey to a 51% attack, with some estimates suggesting losses have already surpassed $100,000 as a result of double spend transactions on the chain. It is the latest example of a 51% attack, where attackers take control of a majority share of a network, reflecting the inherent weaknesses in the proof of work model.

According to a Medium post by Mark Nesbitt, a security engineer at Coinbase who identified the attack, the requirement for ‘honesty’ in proof of work remains the key vulnerability to attacks of this kind. He wrote: “The “honesty” of more than half of miners is a core requirement for the security of [BTC] and any proof of work cryptocurrencies based on [BTC]. Honest action, in this context, means following the behavior described in the…white paper. This is sometimes described as a “security risk” or “attack vector,” but is more accurately described as a known limitation to the proof of work model.”

“Failure to meet this requirement breaks several core guarantees of the Bitcoin protocol, including the irreversibility of transactions,” according to Nesbitt.

The attack follows on from several other similar attacks this year, including those affecting MONA, BTG and XVG. According to Nesbitt, this demonstrates the vulnerability of the so-called ‘long tail’ of crypto assets, as well as the weaknesses of the proof of work system.

“These attacks on VTC are not the only examples of a successful 51% double spending attack. 51% attacks occurred in BTG, XVG, and MONA earlier this year; this is merely another incident that shows that threat actors exist that are both resourced and sophisticated enough to execute this kind of attack. This recent spate of successful 51% attacks has significant implications on what is often referred to as the “long tail” of cryptocurrency assets,” he explained.

“There are a large number of cryptocurrencies, including many based on [BTC], that implement their own proof of work based blockchains. Observers of the industry have claimed that these assets have the same properties as SegWit. This claim has now been undeniably, empirically proven to be false.”

With attacks of this kind becoming increasingly common, it looks as though more unsuspecting crypto investors will be caught out by investing in insecure tokens.

Controversial Bitcoin visionary Dr. Craig Wright recently discussed the mathematical and biological models behind the Bitcoin protocol, in a talk on the philosophy behind Bitcoin released this week.

The chief scientist at nChain, Dr. Wright expressed his theories on the philosophical and technical underpinnings of Bitcoin in conversation with Michael Hudson, founder and CEO at crypto advisory service Bitstocks, in the first episode of the Bitstocks podcast.

Dr. Wright and Hudson also discussed the universal importance of the numbers 3, 6 and 9 in Bitcoin protocols, as well as touching on the role of quantum mechanics and Wolfram 110 of cellular automation in shaping the Bitcoin network.

The discussion explores the philosophy behind bitcoin in technical detail, as well as Dr. Wright’s views on the role of Bitcoin in the wider economy. He suggested that in order to become a global commercial currency, Bitcoin would have to become a universal unit of measurement.

According to Dr. Wright, “If we want one system that can become a global commercial backbone, we need something that can be as universal as a metre. If you take a meter, it’s the same metre here as in France as it is in America. That’s really what we want for money, and a backbone to the economy.”

On ICOs and tokens, Dr. Wright drew parallels with collateralized debt obligations, and the negative impact of the so-called shadow banking industry, which proved damaging to the wider economy.

“Everyone jumping on board this idea of creating tokens and tokenizing things for the sake of it is a more democratised version of the shadow banking industry,” he said. “All the problems that allowed us to have the boom a bust in the housing market and the false economy, we’re now seeing pumped into tokens to make a quick buck.”

One of the most vocal proponents of Bitcoin—now reborn as Bitcoin SV—Dr. Craig Wright summed up by calling for greater cooperation between divergent factions in the bitcoin space, to fully leverage the global free trade benefits of Bitcoin.

He said, “What people need to start considering is not any nationalistic idea of borders, but to remember we’re all one people in one world. That means we should be willing to open up and trade with everyone. Bitcoin allows us to have that level of trade…with free trade, we choose.”

The Bitstocks podcast is available on YouTube from Bitstocks TV and Spotify.

The U.S. Department of Homeland Security (DHS) has become the latest arm of government to take an interest in blockchain, this time with a view to develop forensic analysis tools for analysing blockchain transactions.

The department is seeking submissions from blockchain experts as part of a consultation exercise, inviting design applications as well as commentary from interested parties. The process is aimed at exploring solutions that would allow Homeland Security investigators to conduct detailed analysis of blockchain transactions, including privacy coins, which have until now eluded existing analytics technologies.

Interestingly, the Department of Homeland Security specifies that while previous analysis work has been conducted on Bitcoin Core (BTC) blockchain, it is interested in new options for analysis on privacy coins such as Monero and Zcash, which exist within private blockchains.

This is relevant given the association of privacy coins along with BTC in alleged criminal use cases for these digital currencies, with criminals turning to the anonymity afforded by transacting on these blockchains.

According to the solicitation document, the technology should “provide working approaches to treating newer blockchain implementations,” as well as having applicability in other administrative use cases. It noted, “Because of the significant impact in areas such as governance, data sharing agreement enforcement, and encrypted analytics interchanges, there are a wide variety of applications in government and the commercial marketplace that can benefit from successful product development.”

The pre-solicitation notice will be finalised on December 19, at which point formal applications will be welcomed, as part of the initial stages of a process that could offer greater access for the authorities to these closed blockchain networks.

In launching the pre-solicitation notice, the Department of Homeland Security becomes the latest government agency to increase its focus on blockchain technology.

Recently the U.S. Defense Advanced Research Projects Agency announced plans for a two day research event, as part of its interest in “several, less-explored avenues of permissionless distributed consensus protocols.”

It comes at a time of increasing awareness of the value of blockchain technologies in public administration across different sectors, with government agencies exploring a number of use cases for blockchain systems.

Botnets are being repurposed to distribute crypto mining malware, using victim’s processing power and energy resources to mine for cryptocurrency, according to security experts at Kaspersky Labs.

The findings from cybersecurity company Kaspersky Labs identifies a growing trend towards using botnets in conjunction with crypto mining attacks, which allows hackers the opportunity to commandeer processing power from infected networks.

This processing power is then devoted to mining for cryptocurrencies, including the BTC token, which provides a source of funds for those behind the attacks.

According to the report, botnet owners are increasingly switching towards mining from other attack vectors, highlighting the profitability of this kind of attack. The research suggests that a corresponding drop in DDoS attacks could be as a result of attackers switching focus to mining over other types of malware.

“Evidence suggests that the owners of many well-known botnets have switched their attack vector toward mining. For example, the DDoS activity of the Yoyo botnet dropped dramatically, although there is no data about it being dismantled,” it noted.

The report goes on to say that the malware is often distributed alongside unlicensed, or pirated, software, explaining, “The more freely unlicensed software is distributed, the more miners there are. This is confirmed by our statistics, which indicates that miners most often land on victim computers together with pirated software.”

Kaspersky Labs has previously identified these types of attacks are being attractive for scammers, thanks to the difficulties with detection—both from law enforcement authorities, and from the victims themselves.

Running silently in the background, it is hard for victims to even identify when their system has been compromised, leading to a longer time to detection compared to other types of malware.

There was also the suggestion that some jurisdictions were more amenable to these types of attacks than others, with Kazakhstan, Vietnam and Indonesia amongst the most prominent locations for these types of attacks to originate, according to the report.

The report will serve as a reminder of the dangers of pirated software, and the type of attacks that can infect the computers of those who download software illegally.

Decentralised publishing and content distribution platform Steemit has become the latest blockchain company to feel the heat, as the slowdown in legacy cryptocurrency markets continues to bite.

According to a statement from the firm, as much as 70% of its workforce will now lose their jobs, suggesting “the weakness of the cryptocurrency market, the fiat returns on our automated selling of STEEM diminishing, and the growing costs of running full Steem nodes” were behind the decision.

Steemit was launched to significant fanfare back in 2016, as a way of rewarding content creators for their work through cryptocurrency payments. Powered by its on-platform currency STEEM, Steemit was at one point regarded as one of the leading examples of a decentralised app for blockchain.

Staff members who survive the cull will be tasked with focusing on finding other ways of reducing costs and rolling back the size of the Steemit blockchain, with a view to decreasing the firm’s reliance on Amazon AWS.

CEO and founder Ned Scott said that while the platform still had potential, there was little option but to get costs under control.

According to Scott, “We still believe that Steem can be by far the best, and lowest cost, blockchain protocol for applications and that the improvements that will result from this new direction will make it far better for application sustainability. However, to ensure that we can continue to improve Steem, we need to first get costs under control to remain economically sustainable.”

One of the first dApps of its kind, Steemit was set up to allow users to submit content and get paid for their work. In the recent crypto market slide, the platform’s STEEM coin has been badly hit, losing as much as 96% of its value. As of today, STEEM was trading at $0.37.

The ongoing crypto bear market, dominated by the ongoing crypto sell-off, has put significant pressure on decentralised apps like Steem. The Civil platform is another which has struggled in recent weeks, after being forced to refund early investors in its CVL tokens.

It remains to be seen whether apps like Steem and Civil now have the staying power to cling on under such persistently difficult market conditions.

The Texas Securities Commissioner has issued an emergency cease and desist order against My Crypto Mine and Mark Royer, an individual involved with the company, in the latest wave of enforcement action against illegal initial coin offerings (ICOs).

Royer is accused of acting on a behalf of a disbarred attorney, Samuel Mendez, and a “white collar criminal” Bruce Bise, in offer crypto tokens known as bitqy through a company, BitQyck. Urging investors who missed out on BTC to back BitQyck, the bitqy tokens have subsequently turned out to be near worthless.

At the time of selling tokens to investors, Royer said they were available for $0.02, with the implication that prices would rise to $3 per token. In reality, the tokens are now worthless, with most of those who invested having lost the entirety of their invested principal.

The filing identifies Royer as working for a new firm, My Crypto Mine, without disclosing his prior affiliation with BitQyck and bitqy. My Crypto Mine appeals to investors in Texas and elsewhere to invest in the company, with the promise of significant returns from crypto mining—ironically at a time when some of the world’s largest crypto mining companies are filing for bankruptcy.

The cease and desist order says My Crypto Mine is issuing unregistered securities, and that the respondents are not registered with the Securities Commissioner as agents or dealers, a position that is in breach of securities laws.

The order also alleges that My Crypto Mine has failed to disclose material details to investors, both about the business and about Royer’s past affiliations with potentially fraudulent cryptocurrency schemes.

There has also been a failure to disclose risks to investors appropriately, including notices that government actions could ultimately affect the value of any investment in the company.

The respondents have been ordered to cease and desist from offering securities in Texas, and from acting as dealers and agents in the offer of these securities. It comes as the latest example of a securities regulator cracking down on fraudulent ICOs and token sales, which continue to exploit unsuspecting investors globally.

The prolific developer, who was behind a number of the useful infrastructure projects in the Bitcoin Cash ecosystem, recently shared his thoughts on the so-called BCH hash war and the ABC group—and they’re not pretty.

In a scathing post on Medium, Unwriter was keen to say he was not criticising individual developers, and was not personally attacking any groups or organizations, but instead reflecting on the outcome of the hash war, which has in his view resulted in significant code errors from the ABC team.

“Bitcoin ABC was so afraid of an imaginary attack from SV that they made all kinds of mistakes, writing permanent code in rapid fire releases to the point where what they stand for is no longer recognizable,” he wrote. “And THIS — ABC’s self-inflicted scars that will forever exist immutably on the blockchain — has led to a blockchain I can no longer build on.”

Specifically, he highlighted the fear of an imagined attack from the Bitcoin SV camp as contributing to ABC’s hasty releases, which in his view have made the BCH ecosystem less effective for developers.

In the post, Unwriter goes on to explain that ABC has irreversibly created five conditions that are sub-optimal: that ABC is censorable, centralized, and unstable, and that it is anti Bitcoin maximalist, while signalling the death of ‘permissionless innovation.’

He noted, “There is something very wrong with Bitcoin Cash ABC and its ‘community’ today. There is too much misinformation out there, and people seem too willing to believe anything if it comes from some influencer guy who they see as ‘respected by the community,’ even when they have no idea why they are ‘respected by the community’ in the first place.”

Concluding, Unwriter said that Bitcoin SV is the real Bitcoin, and the one that best serves the needs of users and the developer community. He wrote, “Bitcoin SV is the Real Bitcoin. This is not an opinion. This is a fact. Bitcoin works. And I choose to build everything on top of Bitcoin. I feel 100% safe operating on SV because the protocol hasn’t changed at all, there has been no behind-the-doors centralized collusion…”

The trustee of the defunct Mt. Gox exchange has asked for an extension to the deadline for civil rehabilitation claims, which could allow for claims to be filed up to December.

Nobuaki Kobayashi has disclosed efforts to convince the courts to grant an extension to the deadline for filing claims, in a move that would afford claimants more time in lodging their applications for compensation following the collapse of the exchange in 2014.

On Thursday, Kobayashi said he plans to pursue “efforts to request the court to accept proofs of rehabilitation claims received by December 26, 2018,” following on from the now-passed original deadline of October 22, 2018.

The trustee highlighted the international nature of Mt. Gox creditors, and said he would ask the courts to consider allocating additional time for claimants to file the required documentation as part of their claim.

Despite the original deadline having past, those affected are still able to file claims online, or on paper by a date not later than December 26. However, as noted by Kobayashi, it is up to the courts “whether proofs of rehabilitation claims filed after the deadline will be accepted.”

Once the largest cryptocurrency exchange in the world by volume, the collapse of Mt. Gox was the result of a hack totaling 850,000 Bitcoins, some 7% of all Bitcoin tokens—made up of both client funds and substantial Mt. Gox-owned holdings. The hack was worth around $470 million at the time, and saw a number of investors losing their funds stored on the exchange.

The civil rehabilitation process was initiated following a ruling at a court in Tokyo as recently as June of this year, some four years after investors lost their money, when judges ruled creditors could proceed with claims against the exchange.

If the courts approve the latest deadline extension, creditors will have additional time to complete the filing process, ensuring as many of those affected by the hack as possible have access to the compensation they are entitled to.

Stock exchange firm Nasdaq will reportedly continue with plans that will see them launch BTC futures in 2019 despite the ongoing price slide, according to sources close to the company.

The decision puts Nasdaq at odds with the trajectory of crypto markets, which have continued to wane throughout 2018 as investors increasingly flee the legacy cryptocurrency in favour of more sophisticated alternatives.

Nasdaq has reportedly been working closely with U.S. regulators on the plans, namely the Commodity Futures Trading Commission (CFTC), to bring BTC futures on stream by early 2019, according to Bloomberg.

BTC futures were first introduced in December 2017, launching on exchanges Cboe Global Markets and CME Group. Shortly thereafter, prices began their slide from highs of near $20,000 down to their current level, under $4,000.

After the launch of futures contracts on these exchanges, the CFTC introduced tighter guidelines for listing derivatives based on digital assets, building on the self-certification process used by Cboe and CME at launch.

Back in January, Nasdaq CEO Adena Friedman said the firm was contemplating ways of making its futures distinct from those available at other exchanges.

According to sources familiar with the plans, the Nasdaq futures will use prices from a number of spot exchanges, versus the handful used for pricing instruments on Cboe and CME respectively.

The spot prices will be compiled by VanEck Associates, a firm which has been seeking approval separately from the U.S. Securities and Exchange Commission for an ETF that will track a selection of cryptocurrencies.

The move coincides with similar plans from rival New York Stock Exchange, which is slated to launch its own futures contracts on Jan 24.

With the BTC collapse effectively wiping out the gains made over much of 2017, it remains to be seen whether the demand still exists for BTC futures, and whether these new instruments will hasten the decline of BTC prices as the token continues its descent into obsolescence.

Neither representatives from Nasdaq or VanEck, nor the CFTC, were available for comment on the matter.